Grand Alliance partners could follow NYK to Tacoma

Grand Alliance partners could follow NYK to Tacoma    The top U.S. executive of NYK Line ruled out any chance that the Port of Seattle might retain the carrier's container business when its lease expires in mid-2012 and suggested that thousands more TEUs belonging to partner carriers could also migrate to the Port of Tacoma.
   Two weeks ago the Japanese vessel operator abandoned plans to construct a dedicated terminal at the nearby Port of Tacoma and instead occupy the underutilized APM Terminal there for the next 25 years.
   When NYK Line announced the Tacoma move in 2007 it wanted to operate its own facility, rather than share one with other carriers, to guarantee priority handling for its cargo. At the time, container volumes had been on a double-digit growth path that was expected by the industry to continue.
   Seattle port officials held out hope the news meant NYK Line might be having second thoughts about the switch to Tacoma. NYK Line's agreement with Tacoma said it will become a tenant 'subject to competitive market rates and efficient operating conditions, according to hometown paper The News Tribune. The language gives the carrier a potential exit option.
   But Peter Keller, executive vice president and chief operating officer of NYK Group Americas, stressed the decision was simply based on the new economic reality and uncertainty about when trade volumes will rebound enough to justify the cost of adding new infrastructure.

Keller

   'We're committed to going to Tacoma when our deal in Seattle is up,' he told AmericanShipper.com. 'It really was all about the downturn and there was a lot of excess capacity. It didn't make a lot of sense for either party to build additional capacity that wouldn't be needed for God knows how many years. It's all those unknowns. It was a project that needed to be restructured.'
   The shipping executive also downplayed the escalation in estimated costs to complete the project, which included roads and on-dock rail, as a factor in shelving plans for the new 168-acre terminal.
   'It had nothing to do with planning. It had everything to do with the fact that the bottom fell out of the market,' he said.
   The new arrangement 'is a glove that fit really nicely' because neither NYK Line nor the port would have to spend hundreds of millions of dollars to handle about half the anticipated volumes, Tacoma Port Commissioner Richard Marzano said.
   Overall container volume at Tacoma is down 15 percent through August to 1.05 million TEUs compared to 1.24 million TEUs in 2008, which itself was down 3.3 percent from the prior year.
   NYK, whose ships have called the Port of Seattle for 110 years, moved an estimated 132,000 TEUs through the Emerald City in 2008, according to the Port of Tacoma. Another 80,000 TEUs come through Terminal 18 via OOCL and Hapag-Lloyd, members along with NYK Line in the Grand Alliance vessel sharing arrangement, Seattle port officials say. NYK represents about 7.7 percent of Seattle's container throughput and the alliance together represents 11.7 percent of its volume.
   Terminal 18 is operated by locally based SSA Marine.
   NYK's announcements about moving to Tacoma and subsequently occupying the APM Terminal there did not reference what would happen to the rest of the Grand Alliance's volume on the joint Pacific Northwest string, but Keller suggested it would follow NYK to Tacoma.
   He said NYK's partners would sort out final port destinations as the 2012 deadline approached, but pointed out that the Grand Alliance doesn't call at multiple terminals in the same region except for Los Angeles, the nation's largest trade gateway.
   Seattle port officials say they assume the rest of the Grand Alliance business will leave for Tacoma too, but aren't sure that will happen absent a definitive statement and given the turmoil in the container industry.
   'There's so much fluidity in the business that nobody knows what is going to happen in three years,' Seaport Manager Charles Sheldon said in an interview last week at the port's headquarters.
   'I think by then we'll be able to compensate with other volume,' he said. Key selling points are predictable inland cargo release as a frequent first port of call for Asian vessels and the lack of fees on containers to implement a new program for transitioning the harbor truck fleet to reduced-emission engines.
   Marzano said vessel-sharing partners tend to support the terminal selections of their major partner as long as the terminal is competitive, especially if the carrier has a financial stake in the facility. Keller would not disclose details of the new arrangement, but a Port of Tacoma statement referred to Yusen Terminals, NYK's terminal operating arm, as being part of the business relationship with APMT.
   'I wouldn't think that NYK just came over and leased it,' Marzano speculated, adding he doesn't have specific knowledge about the agreement between the parties.
   Keller said Yusen was the original contracting party with Tacoma and had to be part of the restructured deal, which he called 'no different than any other stevedoring' contract.
   The Tacoma APM Terminal lost its main customer earlier this year when sister company Maersk Line moved its local port of call to Seattle. The terminal currently handles cargo for domestic container operator Horizon Lines. That move was a function of a new alliance this year between industry giants Maersk Line and French carrier CMA CGM.
   In recent years there have been more instances in which carriers stop in both ports. Evergreen Line and China Shipping on Tuesday announced a new joint service between the Far East and the Pacific Northwest to better utilize capacity and share resources. The service will continue to call Seattle where China Shipping opened a new 70-acre terminal in August in partnership with Stevedoring Services of America and Matson. The service will now also serve Tacoma, where Evergreen currently calls.
   More common has been the game of 'musical terminals' played by the carriers seeking the best available deal from Puget Sound, as well as other, ports.
   NYK Line and the Port of Tacoma have 90 days to work out any compensation arrangements associated with pulling the plug on the new terminal development before the matter goes to arbitration, port spokesman Rod Koon said. Tacoma spent about $11 million on engineering and other design efforts to prepare the property for construction. The two sides will negotiate how much NYK pitches in to help cover those costs.
   The Port of Tacoma, which has spent millions of dollars more in property acquisition and other site preparation work, eventually wants to turn the vacant Blair Waterway site into a terminal for other customers once trade shows sustainable growth again. ' Eric Kulisch